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New vs Existing Homes: Which are the Better Investment?
Real estate investors face a number of issues when choosing a property to invest in. One in particular is to whether buy a new property or an existing home. Both have advantages and disadvantages.
How you invest your hard-earned cash should be given careful thought. You want to make sure that your investment delivers good returns. So here we have put together some pros and cons of buying a new home vs buying an existing property to help you with your decision making.
Buying a new home
Brand new properties require less repairs and maintenance than older ones. A new property often comes with a builder’s warranty and appliance warranties for a few months or years. So this can save you money on ongoing costs.
Many tenants, especially younger ones, will find newer properties much more appealing because of their modern style, features and smart home gadgets. Good tenant appeal can mean high rents and a lower risk of the property being vacant for a long time.
You can also claim better depreciation and tax benefits since newer properties depreciate more.
While the benefits of investing in a newer home sound appealing, buying a brand new property may cost more than buying an established home. This can also mean higher body corporate fees if you are investing in a unit, which can affect your cash flow.
Capital growth is another con when buying a new home. A new property rarely has potential for renovations that will increase capital growth.
Buying an existing home
An existing dwelling often gives you the opportunity to boost your equity by doing renovations. Renovations on an investment property are tax deductible.
Existing properties can also be more affordable than newly established properties, so the weight of mortgage repayments may be covered by rental income.
Additionally, established properties are often located in desirable locations near public transport, hospitals and schools. Older houses can be found easily in the suburbs and the inner city.
An existing home may need repairs and maintenance because of wear and tear over time. This could cost you money which can affect your cash flow.
It may be hard to find for prospective tenants because of an outdated and unappealing design. But of course, this will depend on the property’s location and amenities.
Whether an great investment property is good value will boil down to its location, amenities, size, and the current condition of the house. Your strategy, portfolio goals, and financial circumstances will also play a part in the success of your investment property, so it pays to understand your personal situation and the property.
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